Hiring Notches Modest Gains

The U.S. unemployment rate fell to 7.8% in September, the lowest level in more than 31/2 years. Payrolls increased by 114,000 with private companies adding 104,000 jobs. Sudeep Reddy and Phil Izzo join The News Hub to review the data. Photo: Getty Images.

By

Josh Mitchell and

Sara Murray

Updated Oct. 5, 2012 6:27 p.m. ET

The U.S. unemployment rate fell sharply in September to its lowest level since January 2009, suggesting that summer job growth was stronger than previously thought and providing new fodder for a presidential race that has focused on competing views of the nation's economic health.

Data released Friday portrayed a labor market that has perked up a bit since the spring but is still growing modestly. The unemployment rate slid to 7.8%, the Labor Department said, falling below 8% for the first time since President Barack Obama's inauguration. The rate has fallen half a percentage point since July, when it was 8.3%.

More Video

The U.S. unemployment rate fell to its lowest level in more than three years in September. How will this data impact the presidential campaign and will it give President Obama a boost just a month before election? Sara Murray has details on Lunch Break. Photo: Getty Images.

The national unemployment rate fell below 8% for the first time since President Barack Obama took office. Addressing a rally of his supporters, Obama told the crowd America has come 'too far' to turn back to old policies.

Jeremy Zirin, Chief U.S. Equity Strategist for UBS Wealth Management, reviews the September employment data looks at what the data mean for the economy. Photo: Getty Images.

ENLARGE

Employers added a seasonally adjusted 114,000 jobs, a tepid pace that was accompanied by data revisions boosting the number of positions added in previous months by 86,000. The new figures showed that the nation added 181,000 jobs in July and 142,000 jobs in August, and that third-quarter job growth was far higher than in the spring.

Still, part of the growth came from a surge in the number of people taking part-time jobs because full-time slots weren't available. That suggests employers continue to be reluctant to expand in the face of threats to the U.S. and global economies, including deteriorating conditions in Europe and the prospect of year-end spending cuts and tax increases in the U.S.

The report pushed up stocks, with the Dow Jones Industrial Average rising 34.79 to close at 13610.15

The data don't necessarily signal a sudden acceleration in the job market. But they do suggest that a spring slowdown in hiring was short-lived, and that the economy has returned to its recent trend of adding about 150,000 jobs a month, on average. That isn't robust growth, especially with unemployment still high by historic standards, but it represents a clear improvement over the spring, when the economy posted three consecutive months of sub-100,000 job growth.

The unemployment rate showed a more dramatic improvement, but that number is based on a smaller and more volatile survey than the main payroll figures.

The Jack Welch Tweet

Former General Electric CEO Jack Welch took to Twitter this morning to suggest that the Friday jobs numbers were skewed in favor of the White House. Economists were quick to react, Steven Russolillo reports on digits. Photo: Getty Images.

Some economists said the rate's big September drop likely reflected several months of progress in the job market, rather than a dramatic one-month shift.

The report carries political significance, as it was one of the final major gauges of the economy before voters head to the polls Nov. 6 to choose the next president.

The jobless rate is now back to where it was when Mr. Obama took office, after peaking at 10% in October 2009.

While most voters don't base their voting decisions on the unemployment rate, Friday's numbers were good news for Mr. Obama. After the president's lackluster performance in Wednesday's debate, Democrats fear that undecided or lightly attached voters are taking a fresh look at Republican nominee Mitt Romney. A rising unemployment rate, amplified by news coverage, might have given them more reason to do so.

"We're moving forward," Mr. Obama said during a rally at George Mason University in northern Virginia Friday. "This morning, we found out that the unemployment rate has fallen to its lowest level since I took office…More people are getting jobs."

Jack Welch, the former CEO of General Electric Co., sparked a firestorm on Twitter by suggesting the Obama administration manipulated the numbers released Friday. "Unbelievable jobs numbers. these Chicago guys will do anything. can't debate so change numbers," Mr. Welch wrote.

A jobseeker speaks with a recruiter for a retail chain earlier this week at a job fair in Florida. The event aims to help retailers fill seasonal positions for the coming holidays.
The Tampa Bay Times/Associated Press

A Historical View

A senior Treasury Department official said Friday that any suggestion the figures had been manipulated for political gain is "simply absurd."

Keith Hall, who served as commissioner of the Bureau of Labor Statistics from 2008 until 2012, said in an interview Friday that there is no way someone at the agency could change any of the data in its two monthly employment surveys. The significant improvement in the unemployment rate may reflect normal statistical errors in the sampling process, he said, but that has nothing to do with manipulation.

The economy has added 325,000 jobs under Mr. Obama and 967,000 jobs when losses in the public sector are excluded—figures sure to be touted by his campaign.

"The truth is, if the same share of people were participating in the workforce today as on the day the president got elected, our unemployment rate would be around 11%," Mr. Romney said. "That's the real reality of what's happening out there."

Just one president in recent decades, George W. Bush, has won re-election when the unemployment rate was unchanged or higher than when he took office.

For many voters, a new data point will do little to shape perceptions of the economy, analysts said.

"People will probably take some vague sense that things are improving," based on the economy's performance in the past year or so, said Austan Goolsbee, former chairman of the White House Council of Economic Advisers, who is now at the University of Chicago. But "the standard voter is not closely following the monthly jobs reports."

As voters settle into their pre-election views of the economy, their outlook is brighter. In a late-September Wall Street Journal/NBC News poll, some 57% of registered voters said they believed the economy was recovering, compared with 39% who said it wasn't. That marked a more optimistic view of the economy than the Journal poll recorded in several surveys over the summer.

ENLARGE

Voters who are undecided or only leaning toward a presidential candidate rather than enthusiastically supporting him hold a more optimistic than pessimistic view of the economy, though the largest share says it will neither improve nor get worse over the next year.

"It's a tossup," said Ray Fair, a Yale University economist who studies the link between the economy and presidential outcomes. "There are obviously some pluses that the Democrats can talk about and some minuses the Republicans can talk about." His model shows the race too close to call.

Friday's report is the first since the Federal Reserve's decision to begin an ambitious stimulus program—buying $40 billion of mortgage-backed securities a month until the U.S. job market substantially improves. The latest numbers, while offering some encouraging news, suggest that job creation remains slower than the Fed would like.

The jobs snapshot contained several positive signs. Private-sector workers, on average, saw their weekly hours tick up. And the labor force participation rate—reflecting the share of working-age Americans either holding or seeking jobs—remained steady after falling in recent months, though the level still remained low by historical standards.

The report underscores how some industries are hiring while others stand pat or cut back. Of the 104,000 new private-sector jobs, the bulk came in health care, which added 44,000, and transportation and warehousing. Manufacturing employment fell by 16,000.

Marvin Windows and Doors, a family-owned manufacturer in Warroad, Minn., is suffering from the lack of housing construction that its custom-made products serve. Chief Executive Jake Marvin said he expects the company's sales to be flat or slightly higher from a year ago at the end of 2012. Company payrolls have fallen 8% through attrition this year to 4,000 workers.

Mr. Marvin said that with many homes still headed toward foreclosure, the market for middle- and high-end homes "is going to have trouble lifting off the ground in any meaningful way for a few more years."

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.